Strong finish to a mixed week

Investors cheer strong jobs report, set aside rate fears

By

MarkCotton

NEW YORK (MarketWatch) -- U.S. stocks ended higher Friday as a strong jobs report focused investors on the current strength of the economy, and helped them set aside interest-rate concerns that plagued the market for much of the week.

The Dow Jones Industrial Average
DJIA, +0.72%
was up 104.06 points at 11,076.34, the first triple-digit gain for the benchmark index in more than three weeks. The Dow posted a weekly gain of 0.5%.

The Labor Department reported that U.S. nonfarm payrolls increased by a better-than-expected 243,000 last month. See full story.

Average hourly earnings, a component closely monitored by the Federal Reserve in making decisions on interest-rate policy, increased by 5 cents in February to $16.47, up 0.3%.

The unemployment rate ticked back to 4.8% from a five-year low of 4.7% in January. See full story.

"It's a tug of war between earnings and interest rates," said Jim Awad, chairman of Awad Asset Management.

"The job numbers were stronger than expected. Hourly earnings, while for the month were as expected, came in for the year at a level that might make the Fed uncomfortable," he added. "The case is here that we have a strong economy; we're creating jobs, wages are going up, That means for the time being corporate profits are in good shape."

Awad also said the negative side of the jobs data is that it raises the risk that the Federal Reserve is going to have to raise rates over a longer than expected period, increasing the risk at some point down the road that they will begin to affect the economy negatively.

"But for the moment, it looks like it's breaking on the side of the bulls. In other words, let's not worry about the future negative effect of interest rates, but let's enjoy the current strong economic growth we're experiencing and let's reflect that in stock prices," he commented.

The Federal Open Market Committee, the Fed's interest-rate setting body, has raised its key short-term interest rate 14 times in a row to 4.5%. It next meets at the end of March, when it's widely expected to lift the rate by another quarter-percentage point.

On the broader market for equities, advancers outpaced decliners by more than 2 to 1 on the New York Stock Exchange, and by 19 to 10 on the Nasdaq. See Market Summary.

Volume was 1.6 billion on the Big Board, and 1.77 billion on the Nasdaq.

Also on the data front, U.S. wholesale inventories were as tight as ever in January, as sales growth of 1% outpaced inventory gains of 0.1%, the Commerce Department reported. Economists polled by MarketWatch had been expecting inventories to rise 0.6% in January.

Tight inventories should lead to higher production later as wholesalers try to keep up with rising demand by increasing orders to producers and increasing imports, economists say. See full story.

The U.S. federal deficit, meanwhile, reached a record $119 billion in February stoked by tax refunds and other outlays. For the fiscal year to date, the deficit narrowed to $218 billion compared to $223 billion this time last year. See full story.

Other markets

Crude futures ended lower, after recent data showed plentiful U.S. inventory levels and after the OPEC major oil producers left their output limits unchanged this week. The front-month contract fell 51 cents to $59.96 a barrel. On the week, crude dropped 5.8%.

Gold futures ended lower on the session, and on the week. Strength in the U.S. dollar siphoned off interest in the precious metal.

The benchmark April contract fell $5.70 to end at a two-month low of $541.30 an ounce. On the week, the precious metal fell 4.7%. See Metals.

The U.S. dollar was mixed after the latest payroll numbers reinforced the view that the Fed will have to continue lifting interest rates.

The dollar reached a one-month high against the Japanese yen, up 0.7% at 119.02 yen. The euro erased morning weakness to trade up 0.1% at $1.1914.

Stocks on the move

Shares in the Nasdaq Stock Market Inc.
NDAQ, +1.25%
surged 10.3% to $43.56 after the London Stock Exchange (LSE) said that it had received and turned down a conditional takeover offer from the electronic trading network of 2.4 billion pounds ($4.1 billion).

The LSE said that the unsolicited Nasdaq approach "substantially" undervalues the company, its unique position and the "very significant synergies" that would be achievable. See full story.

Nortel Networks
NT
was off 7 cents at $3.02. The Canadian telecom-equipment supplier reported a preliminary $2.2 billion loss in the fourth quarter and said that it would delay filing its 2005 annual report on yet another revision of financial results going back at least three years. See full story.

Citigroup Inc.
C, -0.18%
was up 1.1% at $46.99. The French magazine Le Nouvel Observateur reported that a large U.S. bank has contacted the French government about the possibility of making an offer for a bank in that country. The magazine believes it to be Citigroup, with shares of Societe Generale (013080) moving higher in Paris. See related story.

Shares in JetBlue Airways Corp.
JBLU, +0.32%
fell 7.6% to $10.27 after Prudential Equity Group cut the discount carrier to underweight from neutral weight. The broker said the airline faces longer-term structural issues that are a bigger problem than current losses.

"We believe JetBlue needs to seek available gates elsewhere at JFK, reduce weak long-haul flying and slow aircraft deliveries if stock is to be more than a short-term, news-driven trade," Prudential added.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.